Barack Obama on Social Security

Democratic President (2008); IL Senator (2004)

OpEd: Eliminating FICA ceiling means rich won't spend

Higher-income households, in particular, are facing huge tax increases in the future. George W. Bush had cut the rates for the top bracket, but Obama is committed to letting that expire in
2010, pushing the top rate up to 39.6%. And House speaker Nancy Pelosi is pushing a millionaire surtax. Today, she says the tax is designed to pay for health care; tomorrow, however, she'll doubtless present it as a way to reduce the deficit.
And Obama has advocated eliminating the ceiling on the FICA (Social Security) tax so that we would all have to pay it on our entire incomes, rather than below the $100,000 cutoff as at present.
What higher income household in its right mind would resume spending with these taxes on the horizon?

Good health care and tax reform will save entitlements

Q: How should we fix Social Security and other entitlement programs?

OBAMA: If we get our tax policies right so that they’re good for the middle class, if we reverse the policies of the last eight years that got us into this fix in the
first place and that Sen. McCain supported, then we are going to be in a position to deal with Social Security and deal with Medicare, because we will have a health care plan that actually works for you, reduces spending and costs over the long term, and
Social Security that is stable and solvent for all Americans and not just some.

McCAIN: What we have to do with Medicare is have the smartest people in
America come together, come up with recommendations, and then, like the base-closing commission idea we had, then we should have Congress vote up or down.

2007: Raise income cap to avoid future shortfall

The Social Security crisis is mostly fake. The rather dour projections of the Social Security Trustees, which have been proven overly pessimistic for the past decade, forecast a 75-year shortfall.

However, the supposed crisis of Social Security has
tripped up even our most astute liberal politicians. In May 2007, Obama accepted the premise that Social Security suffered from a mighty shortfall. Seeking to establish himself as a politician not afraid to tackle hard issues, Obama declared his support
for raising the cap on income subject to Social Security taxation (currently $102,000) and chided Sen. Clinton for not doing likewise. Obama at first implied that in his administration, everything would be on the table--higher taxes, lower benefits. He
later explained that he would increase taxes only on people making $250,000 or over, and that he would not reduce benefits. But Obama needlessly accepted conservative conventional wisdom, and then set a trap for himself in having to remedy a false crisis

2007: Raise income cap to avoid future shortfall

for raising the cap on income subject to Social Security taxation (currently $102,000) and chided Sen. Clinton for not doing likewise. Obama at first implied that in his administration, everything would be on the table--higher taxes, lower benefits. He
later explained that he would increase taxes only on people making $250,000 or over, and that he would not reduce benefits. But Obama needlessly accepted conservative conventional wisdom, and then set a trap for himself in having to remedy a false crisis
The Social Security crisis is mostly fake. The rather dour projections of the Social Security Trustees, which have been proven overly pessimistic for the past decade, forecast a 75-year shortfall.

However, the supposed crisis of Social Security has
tripped up even our most astute liberal politicians. In May 2007, Obama accepted the premise that Social Security suffered from a mighty shortfall. Seeking to establish himself as a politician not afraid to tackle hard issues, Obama declared his support

2007: Raise income cap to avoid future shortfall

The Social Security crisis is mostly fake. The rather dour projections of the Social Security Trustees, which have been proven overly pessimistic for the past decade, forecast a 75-year shortfall.

However, the supposed crisis of Social Security has
tripped up even our most astute liberal politicians. In May 2007, Obama accepted the premise that Social Security suffered from a mighty shortfall. Seeking to establish himself as a politician not afraid to tackle hard issues, Obama declared his support
for raising the cap on income subject to Social Security taxation (currently $102,000) and chided Sen. Clinton for not doing likewise. Obama at first implied that in his administration, everything would be on the table--higher taxes, lower benefits. He
later explained that he would increase taxes only on people making $250,000 or over, and that he would not reduce benefits. But Obama needlessly accepted conservative conventional wisdom, and then set a trap for himself in having to remedy a false crisis

What do we do with the losers of privatizing?

"What would the Ownership Society do with the losers (if Social Security were privatized)? Unless we're willing to see seniors starve on the streets, we're going to have to cover their retirement expenses one way or another--and since we don't know in
advance which of us will be losers, it makes sense for all of us to chip into a pool that gives us at least some guaranteed income in our golden years. That doesn't mean we shouldn't encourage individuals to pursue higher-risk, higher-return investment
strategies. They should. It just means that they should do so with savings other than those put into Social Security."

Thus, Obama was able to cut through all the rhetoric and see the key underlying fallacy of Bush's and McCain's proposal to privatize
Social Security. If we allow people to invest in riskier assets in the stock market, we will just have more losers who end up gambling with their retirement money and end up with nothing at retirement.

Raise cap on payroll tax for 3% of earners over $102,000

Q: The Republicans are keeping a running total of all your plans. They say it’s $662 billion over four years.

A: Right.

Q: They say for all your promises not to raise taxes on the middle class, that, in fact, you want to raise the cap on the
Social Security payroll tax, and you also want to increase capital gains.

A: In terms of raising the cap on the payroll tax, right now everybody who’s making $102,000 or less pays 100% of payroll tax on 100% of their income.
There are about 3% to 4% of Americans who are above $102,000 in income every year. So if you want to talk about who’s middle class, me giving cuts to folks making $60,000 or $70,000, and potentially asking more from friends of mine like
Warren Buffett. That’s a debate I’m happy to have with John McCain, because it’s the people making $75,000, $50,000, $60,000 who are hurting.

Raise $97K cap on payroll tax exempting earnings under $250K

CLINTON: I’m certainly against one of Senator Obama’s ideas, which is to lift the cap on the payroll tax, because that would impose additional taxes on people who are educators, police officers, firefighters and the like.

OBAMA: What I have proposed is
that we raise the cap on the payroll tax, because right now millionaires and billionaires don’t have to pay beyond $97,000 a year. Now most firefighters & teachers, they’re not making over $100,000 a year. In fact, only 6% of the population does.
And I’ve also said that I’d be willing to look at exempting people who are making slightly above that.

Q: But that’s a tax on people under $250,000.

OBAMA: That’s why I would look at potentially exempting those who are in between.
This is an option that I would strongly consider, because the alternatives, like raising the retirement age, or cutting benefits, or raising the payroll tax on everybody, including people making less than $97,000 a year--those are not good policy options

Must capture new revenue; no new Social Security Comission

OBAMA: We’re going to have to capture some revenue in order to stabilize the Social Security system. You can’t get something for nothing. And if we care about Social Security, which I do, and if we are firm in our commitment to make sure that it’s going
to be there for the next generation, and not just for our generation, then we have an obligation to figure out how to stabilize the system. I think we should be honest in presenting our ideas in terms of how we’re going to do that and not just say that
we’re going to form a commission and try to solve the problem some other way.

CLINTON: With all due respect, the last time we had a crisis in Social Security was 1983. President Reagan and Speaker Tip O’Neill came up with a commission.
That was the best and smartest way, because you’ve got to get Republicans and Democrats together. That’s what I will do.

OBAMA: That commission raised the retirement age, and also raised the payroll tax. So Sen. Clinton can’t have it both ways.

FactCheck: Removing $97,500 cap would be $1.3T tax increase

Clinton called Obama’s proposal to raise Social Security taxes on earnings over $97,500 per year, the current upper limit on which any tax is levied, a trillion-dollar increase on “middle class families.” Clinton said, “I do not want to fix the problems
of Social Security on the backs of middle class families and seniors. If you lift the cap completely, that is a $1 trillion tax increase. I don’t think we need to do that.”

Taxing all earnings would indeed amount to a
$1.3 trillion increase over the next 10 years alone, according to estimates by Cato Institute Social Security experts. A similar estimate comes from Citizens for Tax Justice, which figures the measure would bring in $124 billion per year.

Obama defended his proposal by saying it would fall only on the upper class: “Understand that only 6% of Americans make more than $97,000--so 6% is not the middle class--it’s the upper class.”

Cutting benefits & raising retirement age are wrong answers

Q: You said earlier this year that everything should be on the table for Social Security, including looking at raising retirement age, indexing benefits, and then suddenly you said, “I’m taking them off the table.”

A: That’s not what I said. I said
I will convene a meeting as president where we discuss all of the options that are available. I believe that cutting benefits is not the right answer; and that raising the retirement age is not the best option, particularly when we’ve got people who are
still in manufacturing.

Q: But in May you said they would be on the table.

A: Well, I am going to be listening to any ideas that are presented, but I think that the best way to approach this is to adjust the cap on the payroll tax so that people like
myself are paying a little bit more and the people who are in need are protected. That is the option that I will be pushing forward.

The wealthy should pay a bit more on the payroll tax

Social Security is not in crisis; it is a fundamentally sound system, but it does have a problem, long-term. We’ve got 78 million baby boomers, who are going to be retiring over the next couple of decades. That means more retirees, fewer workers to
support those retirees. We are going to have to do something about it. The best idea is to lift the cap on the payroll tax, potentially exempting middle-class folks, but making sure that the wealthy are paying more of their fair share, a little bit more.

Source: 2007 Democratic debate at Drexel University
Oct 30, 2007

Privatization puts retirement at whim of stock market

Q: Would you raise the cap for Social Security tax above the current level of the first $97,500 worth of income?

A: I think that lifting the cap is probably going to be the best option. Now we’ve got to have a process [like the one] back in 1983.
We need another one. And I think I’ve said before everything should be on the table. My personal view is that lifting the cap is much preferable to the other options that are available.
But what’s critical is to recognize that there is a potential problem: young people who don’t think Social Security is going to be there for them. We should be willing to do anything that will strengthen the system, to make sure that that we are being
true to those who are already retired, as well as young people in the future. And we should reject things that will weaken the system, including privatization, which essentially is going to put people’s retirement at the whim of the stock market.

Stop any efforts to privatize Social Security

Obama believes we need to preserve Social Security by stopping any efforts to privatize it and will work across party lines to maintain Social Security’s solvency for generations. Obama wants to make private saving easier, cheaper,
& more automatic for middle-class workers. He supported the Save More for Retirement Act, which encourages automatic 401K enrollment. Obama also voted for new rules to force companies to properly fund their pension plans so taxpayers don’t foot the bill.

No privatization; but consider earning cap over $97,500

Q: We all know that Social Security is running out of money, but people who earn over $97,500 stop paying into Social Security. The Congressional Research Service says that if all earnings were subject to payroll tax, the
Social Security trust fund would remain solvent for the next 75 years.

A: I think that it is an important option on the table, but the key, in addition to making sure that we don’t privatize, because
Social Security is that floor beneath none of us can sink. And we’ve got to make sure that we preserve Social Security is to do the same thing that
Ronald Reagan and Tip O’Neill were able to do back in 1983, which is come up with a bipartisan solution that puts Social Security on a firm footing for a long time.

Stock market risk is ok, but not for Social Security

If the guiding philosophy behind the traditional system of social insurance could be described as “We’re all in it together,” the philosophy behind Bush’s Ownership Society seems to be, “You’re on your own.” Relying on the magic of the marketplace is a
tempting idea, elegant in its simplicity. But it won’t work.

Take the Administration’s attempt to privatize Social Security. The Administration argues that the stock market can provide individuals a better return on investment, and in the aggregate
they are right; historically, the stock market outperforms Social Security’s cost of living adjustment. But individual investment decisions will always produce winners and losers. What would the Ownership Society do with the losers?

That doesn’t mean
we shouldn’t encourage individuals to pursue higher-risk, higher-return investment strategies. They should. It just means that they should do so with savings other than those put into Social Security.

Raise the cap on the payroll tax on wealthy individuals

What we need to do is to raise the cap on the payroll tax so that wealthy individuals are paying a little bit more into the system, if we are going to deal with this problem specifically. Right now, somebody like Warren Buffet pays a fraction
of 1 percent of his income in payroll tax, whereas the majority of the audience here pays payroll tax on 100 percent of their income. I’ve said that was not fair.

Source: 2008 Facebook/WMUR-NH Democratic primary debate
Jan 6, 2006

$2000 tax credit for Working Families Savings Accounts

Obama today proposed Working Families Savings Accounts to increase retirement security and give families a greater incentive to save. “The best way for our government to help ensure that every American can retire with dignity is to provide incentives
for middle-class families to save for the future,” said Obama. “My Working Families Savings Accounts plan gives working men and women earning up to $50,000 per year the opportunity to put money in a retirement plan,
whether it’s an IRA or an employer based 401(k), and have that money matched with a 50 percent tax credit for contributions up to $2,000.“

Today, only about half of workers participate in an employer-based pension plan.
Participation rates in other savings plans are substantially lower. Only about five percent of people contribute the maximum amount allowed each year to an IRA or 401(k).

Source: Press Release, “Increase Retirement Security”
Jul 7, 2004

Voted NO on establishing reserve funds & pre-funding for Social Security.

Voting YES would:

require that the Federal Old Age and Survivors Trust Fund be used only to finance retirement income of future beneficiaries;

ensure that there is no change to benefits for individuals born before January 1, 1951

provide participants with the benefits of savings and investment while permitting the pre-funding of at least some portion of future benefits; and

ensure that the funds made available to finance such legislation do not exceed the amounts estimated to be actuarially available.

Proponents recommend voting YES because:

Perhaps the worst example of wasteful spending is when we take the taxes people pay for Social Security and, instead of saving them, we spend them on other things. Even worse than spending Social Security on other things is we do not count it as debt when we talk about the deficit every year. So using the Social Security money is actually a way to hide even more wasteful spending without counting it as debt.
This Amendment would change that.

Opponents recommend voting NO because:

This amendment has a fatal flaw. It leaves the door open for private Social Security accounts by providing participants with the option of "pre-funding of at least some portion of future benefits."

This body has already closed the door on the President's ill-conceived plan for private Social Security accounts. The opposition to privatization is well-known:

Privatizing Social Security does nothing to extend the solvency of the program.

Transition costs would put our Nation in greater debt by as much as $4.9 trillion.

Creating private accounts would mean benefit cuts for retirees, by as much as 40%.

Half of all American workers today have no pension plan from their employers. It is critical that we protect this safety net.

Make no mistake about it, this is a stalking-horse for Social Security. It looks good on the surface, but this is an amendment to privatize Social Security.